The evolution of the SBUX share price (+80% over the past two years) is much larger than most of their peers operating in the retail sector. Moreover this share price is increase much stronger than the growth in Starbucks revenue which is good but not magic (+13%, check here).

All this occurred for the simple reason that the share price increase is primarily motivated by exceptionally high margins due to stable sales prices and combined with exceptionally low cost (prices of coffee beans). The prices of coffee beans has now reached a 4-year low. And just in the past 2 years, the price of coffee beans has decreased by roughly 60%. This is very good news for Starbucks since coffee beans account for a very large portion of their costs (for obvious reasons...) while coffee shops typically do not transfer this cost decrease to their customers: so SBUX costs are collapsing and the revenues are steadily growing...

To make our point clear, you can look at the graph below taken from the public data site Yahoo Finance (click on the graph to be redicted to Yahoo's web page with an interactive graph). The view below is plotting next to each-other for the past two years the curves of the SBUX share price together with CAFE, an ETF that tracks the changes in the prices of coffee beans. In financial terms you can say that the price of these two assets have a very clear negative correlation to each-other (CAFE price goes down = SBUX price goes down, and vice-versa).

All in all, it starts to look more and more like a bubble. The current valuation of this Starbucks (NASDAQ:SBUX) is getting too high and we should expect a severe correction as soon a coffee beans prices start to rise again.